First, let us know more on the What and Why of Intraday Trading before diving into how to do it.
What does Intraday Trading mean?
Intraday trading means a trade that is closed within a day or one trading session. Traders that enter and exit trades within the same day are stated to be intraday traders. These traders buy their shares and sell the shares that they have bought before the closing of the market each day.
What is the Ultimatum of Intraday Trading?
Though these shares are bought and sold that very day, the ownership remains the same, and the underlying features are not termed to navigate. The sole intention behind intraday trading is to earn profit by making trades at highly short periods or intervals.
For instance, an intraday trader buys 100 stocks for ₹461 each. This trader exits the market on the same day, leaving with the stock value that has turned to ₹470 per share. It brings him to the bottom line of making ₹9 profit on each share.
If you are a new Intraday Trader, you might want to keep in mind a few elements before beginning. If a stock is most likely going to move up, you must be a smart trader who buys low and sells high. On the flip side, if a share is predicted to go down, you must be a trader who tends to short sell. In this case, sell high and buy low. If you are a trader who possesses a sharp sense of how the market would behave, then it is the right place for you.
There are three Primary Attributes you should be a kingmaker in for Intraday Trading:
1. Love Taking Risks
2. Capability to follow the market with an Eagles Eye
3. Perfect to Time the Trades
Let me take you to step by step into the process of how to do intraday trading:
A. How to Get Started?
Everything begins with kick-starting through some key points. Firstly, you need to open your very own trading and DemFat accounts. Even if you are already into trading, you might want to open a separate trading account for your intraday trading.
If you want to just give it a shot or are having a budget crunch, platforms like Groww let you open these accounts instantly from where you are at free of costs. So, you do not have to pay for anything, but go ahead and open your first account.
B. Make Sure You Identify your Value Areas
Once you have your accounts in place, you can begin by looking through daily charts, which will help you identify trends in the price movement. As an intraday trader, your primary move would be to pick up the market direction earlier along the way.
The simplest way you can do these is by identifying the value area for the stocks that you plan on targeting.
What is the value area, though?
Value area is the price range, where a minimum of 70% of the previous day’s trade had taken place. Once you have this in hand, find out where the price opens for the day. If the price starts below the range and stays there for a while. There is an 80% chance that it is most likely going to rise.
At the same time if the very same stock starts below the value are and stays there for an hour or more, you can take the long position at the bottom of the value area. These are the two key aspects or thumb rules of Intraday Trading.
Starting off and getting through with Intraday trading is much simpler than you might have thought. But there are other attributes that add up to the benefits of this type of trading over the others.
How is Intraday Trading Different from the Regular Trading that Happens?
There merely lies only one difference between intraday trading and a regular trading system; the delivery of the stocks.
In intraday trading, you sell your positions the same day, whereas regular trading involves a long amount of time. So, the final say to it is that you will get the delivery of your shares the day you bought it. And the shares you bought move out of your Demat account instantaneously.
Why should you be doing intraday trading?
Intraday trading is a promising place where you can take home high returns the very day you began your investments. Irrespective of the fruitful outcomes it gives, you have to watch the market and time your trades to perfection.
‘A Few Expert Tips you could use.’
What kind of stocks do you need to choose for intraday trading?
In intraday trading, you need to sell your stocks before the market can close. So it is mandated to choose liquid stocks to execute such a trading operation. Expert intraday traders recommend the highest of the liquid stocks. These stocks can minimize the chances of your trades impacting the share prices of the selected stocks.
Why Must Time Be Your Best Friend?
Timing the stock market is crucial for any intraday trader. Taking positions at the wrong time can lead to high-end losses. There are high chances of slippery falls when a trader does not take into account every hour of the stock market day during intraday trading.
The Key Benefits of Intraday Trading:
- There are high margins available for traders when compared to investors
- There is a higher return potential
- Lower brokerage charges and more
- Short Horizons for Strategies to Pay off
Intraday trading is more like taking home huge returns the very same day, without having to wait. But big prizes come with a lot of hard work. If you are a trader who can keep a constant eye on the market and understand it, there would be no better place to grow than intraday trading.
Everything has its pros and cons, but if you have what it needs to be an intraday trader then your pros can outweigh your cons. You can make use of this guide in order to kick-start your trading operations.